Brooks v. Commissioner
United States Tax Court
In two separate transactions, the petitioners and their associates purchased the working interests in oil and gas leases, subject to production payments. Their purpose was to operate the leases for profit, but, while the production payments were outstanding, each petitioner's share of the operating expenses exceeded his share of the income accruing to the working interest.
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In two separate transactions, the petitioners and their associates purchased the working interests in oil and gas leases, subject to production payments. Their purpose was to operate the leases for profit, but, while the production payments were outstanding, each petitioner's share of the operating expenses exceeded his share of the income accruing to the working interest. Held: 1. A portion of the operating expenses is attributable to the production of the oil accruing to the production payment, and such portion is not deductible but must be capitalized. For purposes of this case, such…
1Opinion of the Court
Simpson, Judge:
The respondent determined deficiencies in the petitioners’ income tax'as follows:
mi tm
L. W. Brooks and Jane R. Brooks_ $9, 019. 67 $10,134. 89
W. J. Rhodes and Ellie T. Rhodes_ 10, 082. 36 • 7, 717. 60
The issue in this case concerns the tax treatment of the operating expenses of a purchaser of a working interest in oil and gas property when such expenses exceed his share of the production while a production payment reserved by the seller is outstanding — are such excess expenses deductible, or must they be capitalized? If they must be capitalized, then other questions must be…
2Cases cited12 opinions
- Deputy, Administratrix v. Du PontSupreme Court of the United States · 1940
- Thomas v. PerkinsSupreme Court of the United States · 1937
- Doggett v. BurnetCourt of Appeals for the D.C. Circuit · 1933
- Great Northern Railway Co. v. CommissionerUnited States Board of Tax Appeals · 1927
- Widener v. CommissionerUnited States Board of Tax Appeals · 1927
7 more not listed; retrieve them via the Exa API.
3Cited by15 opinions
- Commissioner v. Idaho Power Co.Supreme Court of the United States · 1974
- Landry v. CommissionerUnited States Tax Court · 1986
- Idaho Power Company v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1973
- L. W. Brooks, Jr. And Jane R. Brooks v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1970
- Brooks v. CommissionerUnited States Tax Court · 1968
10 more not listed; retrieve them via the Exa API.